Airbus threatens to quit UK in event of no-deal Brexit

Aerospace giant Airbus has warned that it could pull out of the UK in the event of a no-deal Brexit scenario.

In a Brexit Risk assessment published by the company this week (21st June) it warns that leaving the single market and customs union without a transition deal would lead to severe disruption and force Airbus to reconsider its future in the UK. “Far from Project Fear, this is a dawning reality for Airbus. Put simply, a No Deal scenario directly threatens Airbus’ future in the UK.” said Tom Williams, COO for Airbus commercial aircraft.

The assessment adds that the transition deal currently envisaged by the government (which ends in December 2020) is too short for the EU and UK Governments to agree the outstanding issues, and doesn’t provide enough time for Airbus to implement the required changes with its extensive supply chain. Such a scenario would, it said, potentially affect any new investments in the UK and make it reconsider extending the UK suppliers/partners base.

The firm directly employs 14,000 people at 25 sites across the UK and supports more than 110,000 jobs in the wider supply chain.

Talking on BBC Radio 4’s Today program Williams said that a lack of clarity from the UK government and a reluctance to take onboard industry concerns were forcing the firm’s hand and that it is now beginning to “press the button” on crisis decisions. “We have become increasingly frustrated with the lack of clarity…and come to a point where we have to make serious decisions,” he said.

Williams added that the firm is now beginning to stockpile parts in preparation for “chaos at the border” and that it won’t use new suppliers until a transition deal is in place. He said that the company is now also considering halting investment in new capacity in the UK and seriously considering whether it should continue development of wings in the UK.

Williams said that he was also concerned that in the absence of a Brexit agreement, UK companies will no longer be covered by Europan Aviation Safety Agency regulatory approval – meaning that UK supplier’s parts cannot be installed on aircraft. With this in mind, the firm has stressed that it is vital that the EU supply chain gets prepared.

Airbus has more than 4,000 suppliers in the UK and an integrated supply chain with parts crossing the Channel multiple times. This is operated on a just-in-time basis relying on frictionless trade today provided by the combination of the EU Customs Union and Single Market rules.

Commenting on its impact on the supply chain, Paul Adams, head of aerospace at management consultancy, Vendigital, said: “Airbus is already stockpiling inventory for fear that customs delays could cause production downtime after Brexit. This is putting pressure on the supply chain and could create cash-flow difficulties for suppliers to its wing assembly plant in Broughton.”

Paul Everitt, chief executive of industry trade body ADS, added that Airbus isn’t the only aerospace firm planning for a painful Brexit. “Airbus is one of many businesses who are beginning to implement contingency plans and make decisions on future investment based on the worst-case scenario,” he said. “It is now vital that the government and EU negotiators work hard to reach pragmatic and creative solutions to make sure that the UK maintains regulatory alignment with the EU and the frictionless customs arrangements that industry depends upon to compete in global markets.”

Meanwhile, asked whether Airbus’s latest comments are the result of political pressure from the various European governments with a stake in the firm, Williams told Today: “I’m an engineer, not a politician, I have to deal in certainty, and we can’t continue with the current vacuum in terms of clarity.”

Maybe Airbus need to rethink their business model. If they cant adjust their trading arrangement to deal with the 5th largest trading nation in the world which by the way is already making parts for Airbus , then maybe Airbus will not be successful when trading their products with the rest of the world.

We may be the 5th largest before BREXIT but we will be a much smaller trading nation as other large companies leave the UK. Why would any company want a presence in the UK if they have to pay import/export tariffs? The UK thinks it is vitally important to the rest of the world and they will want to strike deals with us, but there are many companies and countries who will be very happy to take our existing business. Perhaps it will be the job centres that will be booming in the future?

To be fair to Tom Williams, this is a real problem. What bothers me about articles and statements of this sort is that whenever ‘a lack of clarity’ is cited as a problem it is assumed that the lack of clarity is all the fault of the UK government, but my reading of the political situation tells me that the EU people are deliberately creating unnecessary stumbling blocks to create delay and uncertainty.
The kind of problem that theoretically arises for Airbus is where materials and half-finished parts cross the UK/EU border several times. The implication is that there will be delays and duty to pay at each stage. This of course is rubbish. With proper planning parts can be sent across borders and duty is only paid on the value of work done in each place, and with proper accounts with the clearance organisations, the delays are a matter of no more than a few hours. That is how it works for my small engineering organisation working with suppliers of specialist services in USA. For a big organisation with regular movements of parts, etc., it should be even easier.

Absolutely, but as previously stated, sorting out tariffs is relatively easy. It’s the logistics of components/vehicles making multiple journeys across the Channel where the problem lies. Hence why the customs union is the real crux of the issue.

What bothers me about articles and statements of this sort is that whenever ‘a lack of clarity’ is cited as a problem it is assumed that the lack of clarity is all the fault of the UK government, but my reading of the political situation tells me that the EU people are deliberately creating unnecessary stumbling blocks to create delay and uncertainty.

Jonathan, the ‘EU people’ were not the ones that voted for the UK to leave the European Union. The uncertainty that has arisen as a result of Brexit must surely fall on the shoulders of those that initiated the process.

Trevor, you’ve omitted the proceeding statement from that document, which can be found below. This is not about tariffs, this is about the physical transport of components.

“However, Airbus relies on a highly integrated supply chain across its home nations. The
continued ability to move components and equipment across borders quickly and efficiently
is crucial to our UK business. New checks at UK/EU borders would cause significant
disruptions and delays, as well as additional administrative complexity and increased costs.”

Andrew I acknowledge that customs checks & additional administration could increase costs, yet I’m sceptical about the claim Tom Williams made (having listened to the interview) these could amount to ‘billions of pounds a week’

I agree that ‘billions of pounds a week’ (annual turnover for 2017 was €66.77bn) definitely does not seem right. However, the costs are undoubtedly real and would almost certainly be billions over the course of a year, especially when delay penalties are included. Can you really expect a company not to act to mitigate that sort of loss?

Despite his ‘I’m an engineer not a politician’ claim Tom Williams delivered a well aimed and well deserved kick up the UK government’s posterior; if they and the EU can move beyond process and start negotiating details maybe we can salvage something from the situation … I guess I’m just naturally an optimist

Fair. But the idea of ‘no-deal’ is simply not an option for international manufacturers. The fact that it appears to be increasingly likely is why Williams has spoken so forcibly. Expect more from industry as the precipice gets closer.

As I understand it, the billions of pounds per week would be penalties to airlines in the event that Airbus is unable to deliver planes, because they don’t have wings to hand.

More likely is an increase in costs as their JIT system breaks down due to border checks, or the need to fly routine parts from the continent to the UK due to delays at Dover.

More worrying is the certification issue, though it’s hard to believe that would happen. It would only be in the event of a “bad tempered no deal”, in which case the UK will have bigger problems than Airbus.

This is a complex problem , which was conveniently not raised by anyone in particular to inform the blinkered Electorate, like most of these ‘petty ‘ details.
If parts are stockpiled to maintain production there is no particular reason why Airbus should continue to fly and float wings to France and then relocate. However, if they are flown in the Guppy, there is no reason why the Broughton site should not be ‘Airport-sealed ‘ for closed consignments. If the WTO Agreement does apply, then it’s a non-argument which , if the bureaucrats get their act together can be solved easily.
The main issue is the Brexit Commitee’s policy of not being at all helpful to manufacturing industry, the transport industry and everyone else by persistently stating ‘ that it will be all right on the night’ without saying what they will actually do. Keeping it all a secret to avoid spoiling negotiations is nonsense; the Eu 26 don’t have a problem – we do, and this lack of action by the Govt. just feeds uncertainty and we will get more of these issues being raised the closer we get to the cliff edge.

Defending the UK and Brexit is fruitless effort and blaming the EU is downright stupid because we are the ones acting stupid. We decided (but not me) to cut off the nose to spite the face with brexit. The vast majority of companies did not want this with the exception of Dyson and JCB (morons) and maybe a few others. This government is wholly incompetent and animals are getting restless. This country is not a powerful trading nation anymore and this has been the case for quite a while. We have this dream about forging a new tomorrow with trade deals with great prosperity but we will be catching the crumbs from the table in the end. It’s also depressing that some people from technical and scientific backgrounds voted for this cup of cold sick. We shall see what happens with Airbus but don’t expect the goose that lays the golden egg, it lay a rotten one and that’s a fact.

Summed up in one, Shaun-all caused by a referendum which never gave the public the facts and results which would arise from leaving the EU. What have we gained? I suppose that one answer to that question is that to hold a referendum of such enormous impact without giving ALL the problems which would (and have) arise was stupidity (bias?) of the highest order. Smug satisfaction on the face of just over half the population. What effect does the word “great in Great Britain have on our minds? Rather than the intended meaning of a collection/union of our Island countries, it seems to create the idea that it means we are superior in some way, consciously or not. Well, we shall see. We got where we are today due to grabbing more of the world than other sea-going European countries and selling them our goods in return for their assets (e.g. cheap cotton from India to feed our northern mills). Not alone in this of course, but this decision to leave has deep roots

The arguments from Andrew Wade and Shaun Fowler seem to be raking over old ground to me, and using emotive terms with it. However we arrived at this point, I see the EU negotiators as deliberately making things more difficult than they need to, and to some extent they are showing up the very reason many felt they should make the split.
Meanwhile, as one who does a lot of trade from the UK outside of the EU, I feel justified in saying that it really isn’t THAT difficult.

If we end up outside of the customs union, and Airbus has to move goods across a ‘firmer’ border than at present, what are the options ? It is clearly in the interests of the UK and the EU to see Airbus prosper. For all their apparent lack of clarity, the UK government could hardly be said to be seeking to increase difficulties of trade with the EU, given that the UK must exit, so where is the threat of difficulty coming from ? It is the EU. For their own, probably selfish, reasons they are threatening difficulties, so it is they who appear to be ‘cutting off their noses’.
If they don’t want the UK’s expertise in aeronautical engineering, maybe we should work with Boeing, Bombardier, Embraer, etc. ?

The UK – or rather Theresa May – is deciding to leave the single market and customs union. That is going to make life a lot harder for many businesses, to the extent that the Government’s own forecasts predict a 8% fall in GDP from this strategy (And given Brexit has already cost about 2% of GDP, that 8% seems very optimistic).

As for working with Boeing etc:
– Do you think Boeing would set up an operation to make wings in the UK? Do you think that would please Trump with America first?
– A lot of the expertise comes from the continent, and many of the UK employees will relocate – probably to France. It’s not to reassemble it into a new company.

The arguments from Andrew Wade and Shaun Fowler seem to be raking over old ground to me, and using emotive terms with it.

What are the emotive terms I’ve used that you have issue with Jonathan?

Jonathan Douglas
Meanwhile, as one who does a lot of trade from the UK outside of the EU, I feel justified in saying that it really isn’t THAT difficult.

This is not about the UK trading outside the EU. This is about a major transnational company (and massive UK employer) that has supply chains and manufacturing facilities all across the EU. If one of its hubs (UK) is no longer within the EU (more specifically the customs union), then of course that presents significant logistical problems, as Tom Williams has highlighted. No one is trying to make things difficult. These are just facts, facts brought about by Brexit, and government policy to leave the customs union. Decisions have consequences and these consequences are beginning to manifest themselves. Blaming anyone other than the UK itself is cognitive dissonance on an enormous scale.

For all their apparent lack of clarity, the UK government could hardly be said to be seeking to increase difficulties of trade with the EU, given that the UK must exit, so where is the threat of difficulty coming from ?

The UK is choosing to leave the single market and the customs union. In what universe is that not ‘increasing difficulties of trade with the EU’???

Yes, Andrew Wade, your comments are a lot less emotive than the other fellow. My point would be that given a decision to exit (and I’m not commenting on that in itself) the most polite thing you could say about the EU people is that they are not bothering to be helpful.

I’m not exactly sure what you mean by helpful. The EU is looking after its own interests, as it can only be expected to do. The fact that it is not acquiescing to all of the UK’s wishes/demands (several of which are contradictory) and completely rewriting the fundamental principles of the union itself can hardly be a surprise. The problems that the UK is now facing are entirely of its own making, yet those that shouted loudest for Brexit are now completely disowning the inevitable situation that has emerged and laying the blame at the door of the EU.

The EU has far more on its plate now with dysfunctional governments in the Eurozone (Italy, Spain, Greece), as well as Hungary and Poland one possibly falling apart in Germany not to mention the UK where our government is tearing itself apart as we look on. So why on earth would Brussels bother, let alone help? We started it so we can finish it and screw ourselves into the bargain. The decades spent investing in science and engineering to make the UK a country of choice for intra-EU as well as global investment is all down the drain. Ditto for the City. If the UK ever gets back to leadership in many areas, I will be long gone. Tragic. I expect Churchill and Thatcher are revolving in their respective mausoleums.

Airbus aside it seems to me that the whole exit enterprise was flawed from day one, it was almost as if David Cameron got up on a Monday and said ‘right, I’m fed up with public and parliamentary opinion on immigration so we’ll have a EU exit referendum if that will satisfy the people’ That may be cynical but the subject is massively over discussed day and night on every media channel possible and that must take resource away from the task in hand. Furthermore, the media as a collective perhaps lead by the BBC is trying to make every situation worse that reality when clearly those reporting seem to work towards creating uncertainty. The exit from the EU was such an issue of complexity commercially, politically, etc. that is beyond the ability of almost the whole population barring real experts (and I do not mean politicians of any persuasion!) to understand the multifaceted effects and counter effects in all areas. That, by the way is not ‘superior view’ as I count myself firmly amongst the ill equipped public. Every pundit without fail has a different and equally convincing argument which in isolation could convince most people. No wonder industry is confused and concerned.

With proper planning parts can be sent across borders and duty is only paid on the value of work done in each place,

Interestingly enough, it was this element of international trade which allowed one political party to ‘stick-it’ to one of the Lordly appointees of the other political party: such that he spent about a year at the pleasure of HMQ: I refer to the inventor of the Gannax Mac and the 70s/80s.
I am looking forward to seeing even more settlement of old scores!

how many times a Mini crankshaft crosses the Channel: I believe it was 5 (6 if the car is exported).

Didn’t Adam Smith have something to say about this in the 1700s: that the efficiency (he described the manufacture of pins) of operations when ‘the division of labour is applied’ of any activity increases. Not being well versed in the art of making engines, I can only suggest that the manufacturers do NOT ship crank-shafts (or anything else) around to anywhere (let alone across borders) for fun: but because it is cost efficient to do various operations where they are done best? One of the questions I always asked a new client when starting an assignment to develop their business was to ask “What are you good at?” This often elicited the answer “we make such-and-such or assemble so-and-so.” “I didn’t ask that, I already know that, I asked what are you good at?” Then they started to think, and it became clear they might be good at costing, or have excellent inter-company communications, or have very good overseas agents…and so on.

Perhaps the manufacturers of engines do indeed have good ‘grinding’ to tolerances’ or casting facilities, or hardening etc spread out amongst their constituent parts: a very good reason for doing what one part does best, always there.

governments in the Eurozone (Italy, Spain, Greece), as well as Hungary and Poland one possibly falling apart in Germany not to mention the UK where our government is tearing itself apart as we look on.

Companies and Countries have no souls: they have functionaries and civil servants: and apart from delusions of grandeur at their very summits( a disease that afflicts many cabinets and boardrooms) mostly these are the vehicle for advance. Being able to operate constant deficits is hardly Capitalism, but they seem to get away with it.

Not exactly surprising, since the government has singularly failed to provide any forward planning for post 2019, beyond promising instantaneous advantageous and wonderful trade deals with all and sundry. Any company, let alone a multi-national, is supposed to take a strategic view of the future and be prepared for as many scenarios as possible. Funnily I thought that was also a function of government! Instead of focussing on their individual best interests or narrow views they are supposed to look at the big picture. Trade deals with a capricious Trump who ignores and cancels them on a whim?

like it or not the vote went to leave. so adapt to it. if airbus do leave the uk you can bet your bottom dollar that they would want to sell their aircraft here…. the boot would then be on the other foot wouldn’t it.

If the UK tried to ‘tax the hell’ out of Airbus, the only UK airline that might realistically be affected is easyjet, which has already announced plans for an Austrian HQ post-Brexit. BA is Spanish-owned. Airline operations, like aircraft manufacture, are multinational by nature. Airbus simply does not need to sell its aircraft to the UK.

Oh no, wait, all the airlines would relocate to mainland Europe instead, and even more people would be out of a job. We might be losing freedom of movement, but companies and organisations certainly aren’t.